Creating a Company Structure That Scales

I love people.

I loave people.

I loavthe people.

I loathe people.

Yes...it can happen that quickly. All it takes to move from loving people to loathing them is three–small–steps.

The same is true within teams.

• One wrong hire can disrupt your team.
• One wrong promotion can dislodge an entire department.
• One loathsome person left un-fired can be cancer to your company.
• One org chart mis-structure can create massive communication challenges.

That's why today, I want to talk about the importance of nailing the people side of your business and then share how you can create the right structure for it.

Lots of Problems – Few Solutions

In talking about people, many of you may have been tempted not to open this week's edition.

I don't blame you.

Dealing with people is arguably one of the least favorite aspects of leading a company.

That said, there is a reason why most of the best-selling authors all write on the topic.

Because you can't scale without dealing with your people issues.

Don't believe me? Here is what a few of the "greats" say:

• "Great vision without great people is irrelevant. The old adage ‘People are your most important asset’ is wrong. People are not your most important asset. The right people are." - Jim Collins / Good to Great
• "If you can get all the people in an organization rowing in the same direction, you could dominate any industry, in any market, against any competition, at any time." - Patrick Lencioni / The Five Dysfunctions of a Team
• "Only the right people, with the right temperament, doing the right jobs, will create an environment in which people feel safe to trust and cooperate." - Simon Sinek / Leaders Eat Last
• "People decisions are the ultimate – perhaps the only – control of an organization. No matter how well designed the structure, it will not work if the people don’t have the capacity to perform." - Peter Drucker / The Effective Executive
• "The single most important thing you can do is hire the right people and get them in the right roles. Everything else will follow from that." - Daniel Pink / Drive

Now, as much as I love each of these authors and have read most of their books, the one thing people lack after reading their books is knowing what to do about all of the people issues they just helped you discover.

I don't think it's intentional. Each organization's process for determining how to deal with people's issues is nuanced, so they tend to speak to high-level principles only.

That's why the rest of this email is designed to be a guide for you to explore how you can practically create the best structure for your company.

Your company structure is the key tool necessary to start dealing with all your people problems.

Understanding 3 Major Functions of All Companies

Before we begin, it's important to understand one more principle to set the stage for creating your company's best structure.

All companies, big or small, ultimately have three major functions.

1) Sales/Marketing → Customer Acquisition

2) Operations → Deliverability of Product or Service

3) Finance → Cash Flow / Value

Some of you may dismiss the importance of one or more of these functions, but it's imperative that you nail each of them. Here's why:

• Sales + Operations - Finance = Cash Flow Issues
• Sales + Finance - Operations = Unhappy Customers
• Finance + Operations - Sales = No Customers

If any of these functions suffer, the entire business will feel it.

The best construction companies can file for bankruptcy because their A/P and A/R are not managed well, and they run out of cash.

The best SaaS companies can kill their revenue even with the best sales team because customers are so frustrated with the product itself (the old "overpromise and underdeliver" issue).

The best manufacturing companies can close before anyone ever sees their revolutionary product because they could never figure out how to sell it.

Key Principle: You need all three functions to win, succeed, and scale.

Create Your Structure

So, with these 3 functions in mind, here is how you tackle creating the best structure for your company.

I've done this process for dozens of companies, and this is by far the best approach I've found.

Step 1: Create the Functions

Start by thinking about all the different functions your company will need in the next 6 to 12 months. 

For now, don't think about "who," only "what" you need to accomplish your goals. i.e., think functions, not titles.

Take 5 minutes to create a high-level org structure that only lists functions (don't worry, you can refine it as needed later–for now, take your best stab at what you think is actually needed).

You should end up with something like this:

Now, depending on your size, you may separate Marketing from Sales or HR from Finance, which is 100% fine, but these sub-functions all approach the same major goals listed above. 

Step 2: Create the Roles

With your high-level functions in place, it's time to start defining each function's 3-5 critical roles.

Before you get started on this, here are a few important tips:

1. Limit each person's function to 3-5 roles, max. Pushing over five roles can tend to spread people too thin.
2. Focus on Functions/Roles, NOT People. Don't think about who is already on your team; think about what you believe is actually needed to accomplish your goals.
3. No Function should have the same Role. Apart from identical functions due to scale (e.g., 4 Customer Support staff doing the same job), roles should be unique to each function so it's 100% clear who is responsible for what.

So, as you add in the roles to each function, you should end up with each function looking something like this:

Step 3: Add In Your People

Now that you've created the best structure for your company's future, it's time to examine your roster of people and begin assigning them to the functions you have in place.

Do this based on the following:

1. They must be the "right" people. I define "right" people as those who are tightly aligned with your Core Values. If you don't have real, solid Values as a company, check out my recent post on creating Core Values.
2. They must have the competency to sit in the seat. If you need someone to oversee Sales, and the only person on your team currently doing sales is the summer intern you hired six months ago, they probably won't be able to fill the seat you created.
3. Managers must include "LMA." LMA is the only recurring role on the org chart, and it means to "Lead, Manage, and Hold Accountable." This is required of any person who will be managing a team, regardless of their expertise.
4. Do not force people into functions. One of the more challenging aspects of doing this exercise well is not forcing the wrong people into positions because you have a relationship with them. Use discipline and discernment to ensure the right people make it into the right seats.
5. Be willing to train, hire, and fire. Look – this part is not fun, but if you want your company to succeed, it may mean that some people are not right for your organization. This may require that you hire some new people or fire some old ones. Ideally, you merely need to train people in their roles, as they are the right people, you love them, and you see the potential for them to fit in the seat.

As you complete the roles for each of your functions and add in your people, you'll end up with something like this:

I cut out the 3rd and 4th tiers for size purposes, but this should give you an idea of what you're looking for.

Typically, you'll end up with a few positions that have no people assigned to them. That's normal and expected.

This just means you now have a new goal → Hire the right people to fill the necessary functions for you to scale your business.

Congratulations! If you've followed these steps, you'll now have your first draft of the structure needed to properly scale your business.

Don't Stop Here

The temptation of an org chart is that it is only used for hiring purposes. 

This is NOT true!

Yes, you now have the structure in place you need to scale your business. But you've also created one of the foundational pieces to managing your team.

The 3-5 Roles.

Each function should now be reviewed, rewarded, hired, and fired based on their ability to perform these necessary functions.

These all tie into my "Quarterly Check-in" resource, helping make the coaching of your teams much more effective and efficient.

Put these tools to work, and have fun scaling your company with minimal stress and maximum outcome.

Be sure to reevaluate your company structure quarterly or annually, always considering what's needed 6-12 months out.

This will help you stay on top of scaling your business healthily.